Depreciation

Depreciation, loss in the value of an asset brought about by age, use, or both. Over the economic life of an asset, depreciation can be considered equal to the difference between the price of the asset when new and its scrap value. In accountancy, the amount needed to compensate for depreciation can be estimated through the course of the asset's economic life. A depreciation reserve can then be built up. Depreciation is allowed for in calculating corporate taxes for items such as equipment, furniture, real estate, and cars.